The electronic structure of cobalt-induced magic clusters grown on Si͑111͒-͑7 ϫ 7͒ is investigated by scanning tunneling microscopy, scanning tunneling spectroscopy, and real-space multiple-scattering calculations. Topographical images of a half unit cell of Si͑111͒-͑7 ϫ 7͒ with the cluster acquired at low bias voltages of ±0.4 V show greatly reduced cluster heights; however, the heights of the corner adatoms are unchanged, indicative of the highly localized nature of the charge distribution. Spectroscopic studies of the clusters indicate a band gap of ϳ0.8 eV, suggesting localized nonmetallic behavior. The opening of such a band gap is suggested to be a stabilizing factor for the observed magic clusters. A 65-atom Co-Si cluster is constructed to calculate the momentum-and element-projected density of states. The calculated result identifies that the intense state below the Fermi level at −1.75 V in the experimental spectroscopic curve is primarily due to localized 3d orbitals of Co atoms in the magic clusters.